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All of the major US stock indices had positive returns for the month of April, as strong earnings reports allowed the markets to regain some of the earlier losses due to proposed tariffs and interest rate increase concerns. During the month, concerns about a hawkish Fed and higher inflation expectations pushed the yield on the 10-year government bond above 3% for the first time in more than 4 years. The month ended with the yield on the 10-year bond at 2.96%.

During the month, both the Dow and the S&P 500 rose .3%, while the Nasdaq gained .1%. These relatively small moves are a big contrast to the volatile first few months of the year…

For the month, Consumer Staples (-1.53%) and Industrials (-.38%) were the only sectors in the red. Energy was the best-performing sector, gaining 9.64%, followed by Health Care’s 3.96% gain and Consumer Discretionary rising 2.96%. The Energy sector has made a big turnaround, after a relatively poor performance last year, while Technology has cooled from its meteoric 2017 rise.

Oil prices ended higher, with West Texas Intermediate crude settling at $68.47 a barrel, posting 5.6% monthly gain. The possibility that the US may reimpose sanctions on Iran is a bullish factor on oil prices. However, higher oil prices may translate into higher costs for corporations and consumers, in turn leading to a pullback in the current 9-year economic expansion.

Economic indicators showed mixed results. The Chicago PMI eked out a small gain from 57.4 in March to 57.6 in April. However, any reading above 50 indicates improving conditions. Consumer confidence increased in April to 128.7, up from 127.0 in March. Unemployment stubbornly remains at 4.1%, a 17-year low. The Consumer Price Index for All Urban Consumers (CPI-U) decreased 0.1% in March on a seasonally adjusted basis. Over the last 12 months, the all-items index rose 2.4 percent. On the whole, these numbers reflect a healthy economy and support further interest rate increases.

The markets seem directionless at times, and with the heightened volatility of the past few months, investors may be tempted to follow the old adage “sell in May and go away”. This saying refers to the seasonal decline in the markets for the six-month period from May thru October. (While there is historical backing to this phenomenon, the trend has not been supported in the last five years).

While we are unlikely to return to the historically low volatility we witnessed over the past few years, we believe that the economy is fundamentally strong, and positive earnings, GDP growth, and a strong labor market will outweigh the impact of rising interest rates, protectionist policies, and geopolitical threats. We maintain that a properly allocated portfolio based on one’s risk profile and a long-term investment horizon are the pillars to achieving investment goals.